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Saturday, November 19, 2005

Job Churning

This discussion from the Minnesota Fed looks at job churning at the county level. The variation in job growth across counties is larger than I would have guessed:

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November 2005: Helicopter churn: The macro view on job loss and growth, by Terry Fitzgerald, Mark Holland: ...This fedgazette looks through a ... window of time ... to see what might be learned about the sources and effects of employment shocks during this period. ... From a longer-run perspective, it is clear that employment shocks are not rare. In any given year, even with a hot national economy, some counties will experience a major decline in employment. The reason for this is an often overlooked feature of market economies called “churn.” Simply, market economies tend to create and destroy a lot of jobs simultaneously, as employers collectively allocate scarce resources for additional labor in some sectors and occupations while cutting back in others. Even in strong job markets, some jobs are being lost, just as some jobs are gained in the midst of a recession. ...

Data on all district counties from 1969 to 2002 show that major job loss happens ... often... In three-plus decades, there were more than 900 instances where one of the district's 303 counties experienced an employment decline of 3 percent or more—roughly, one every decade for each county in the district. ... Are the same counties getting endlessly sucker-punched? In general, no. During the 1969-2002 period, every district county except one experienced a net employment decline in at least one year, and better than 80 percent of district counties endured a 3 percent employment loss in at least one year. ...

But some counties certainly experience more than their share of shocks. Though all counties have some probability of employment shock, small counties are more prone. Counties with fewer than 4,000 workers make up 44 percent of district counties ... But these counties experienced 66 percent of the 905 employment shocks... At the other end, 7 percent of district counties have more than 32,000 workers, but they experienced just 1 percent of all shocks.

Chart: Number of Counties in the 9th District with Employment Shocks and Booms

Flip side: The boom Before getting too gloomy about the employment picture in the district, remember that counties also experience employment booms more frequently than you might imagine. From 1969 to 2002, 86 percent of district counties experienced at least one year of 5 percent employment growth. Furthermore, a majority of counties saw at least one year of 7 percent employment growth, and all but one county had at least one year of 3 percent growth. ... The moral of the story? A central feature of U.S., state and county labor markets is job churn. Each year millions of people nationally lose their jobs. But in most years, an even larger number of people find new jobs. The same is true on a smaller scale at the county level. Jobs are gained and lost within a county, and oftentimes other counties offer an employment counterbalance. Again, however, counties with fewer than 4,000 workers experienced proportionately more shocks than booms from 1969 to 2002... Job churn can often be messy, unpleasant—even gut-wrenching—particularly at the household and community level. But over time, it is this very churn that helps struggling economies transfer resources to better uses, while keeping healthy economies robust in an ever changing world.

The positive correlation between "booms" and "shocks" that emerges around 1995  in the graph is interesting. Prior to 1995 the correlation appears to be negative - when more counties are booming, fewer are experiencing shocks. After 1995 it is reversed - when more counties are booming, more are also experiencing shocks.

    Posted by on Saturday, November 19, 2005 at 12:54 AM in Economics, Unemployment | Permalink  TrackBack (0)  Comments (2)

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